Animal drug-maker Dechra Pharmaceuticals (DPH) is developing a reputation for making value-adding acquisitions.

The Cheshire-based cat, dog, horse and farm animal-focused company spent £180 million on buying three businesses in the year to 30 June, which have already helped to boost profits.

Earnings before interest, tax, depreciation and amortisation (EBITDA) moved 20.8% higher to £58 million during the year, partly thanks to the acquisitions of US generic drug-maker Putney, Croatian poultry vaccine specialist Genera and Mexican veterinary drug company Brovel during the period.

Organic growth also played a role thanks to rising demand in the US, expanding into new territories and new product launches.

The growth potential of its recent acquisitions is behind the 4.4% share price gain to £13.57 when the figures were published. New products are in the pipeline in the US thanks to the acquisition of Putney, while Brovel could potentially provide access to Latin America.

Web - Dechra - 5 September 2016

Numis is bullish labelling Dechra as a ‘high quality, defensive growth opportunity’. Its analysts forecast double-digit EBITDA growth in the coming years, with the figure expected to improve by more than 25% to £73.5 million in Dechra’s current financial year.

‘Our forecasts are well supported and we could see further upside depending on timing of Putney US FDA approvals of its generic pipeline, further leveraging Dechra’s bolstered US sales and marketing platform,’ Numis said in a note.

Another benefit for the geographic expansion resulting from Dechra’s acquisition strategy is that it has allied any fears of any impact from the UK voting to leave the European Union.

Issue Date: 05 Sep 2016